Fiscal Support Agreement And Security Package Term Sheet (OCTP Oil And Gas Project) Approved By Parliament

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Parliament on December 11, 2014, approved the fiscal support and security package term sheet for the Offshore Cape Three Points (OCTP) project. This brings to an end a series of negotiations that started in 2013.

In line with GNPC’s mission to lead the sustainable exploration, development, production and disposal of Ghana’s petroleum resources, GNPC, together with its Partners eni Ghana Limited (eni) which is the Operator in the Offshore Cape Three Points Petroleum Agreement, and Vitol Ghana Limited (Vitol) are undertaking the development of the Sankofa and Gye Nyame Oil and Gas Project and have concluded negotiations in this regard.

It will be recalled that between 2009 and 2012, Non Associated Gas discoveries were made by GNPC and its OCTP partners, in the Sankofa Main, Sankofa East and the Gye Nyame fields with total reserves of 1.15 trillion cubic feet (Tcf). Oil was also discovered in Sankofa East with a reserve base of 131 million barrels.

Due to the strategic importance to the economy, and given the limited reserve, Government requested the OCTP partners to sell the gas to the domestic market to meet Ghana’s increasing energy demand. Pursuant to Article 14.15 and 14.16 of the OCTP PA, eni and Vitol commenced negotiations with GNPC.

An initial gas price of US$9.80/mmBtu which is effective from 2014 has been agreed by the Parties.

A Government of Ghana Negotiating Team made up of representatives from the Ministry of Energy and Petroleum, Ministry of Finance, the Petroleum Commission and GNPC was constituted to negotiate the technical, commercial, legal and security elements of the integrated OCTP oil and gas project.

These negotiations were held within the framework of the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84), the Petroleum Revenue Management Act, 2011 (Act 815), (PRMA) and the OCTP PA.

The Project
The project which is expected to cost approximately US$8 billion would be an integrated oil and gas project. Phase-1 is for the production of oil, with first oil from the Sankofa-Gye Nyame Field expected in August 2017.
Phase- 2 which is the production of gas, projects first gas to come on stream in the second quarter of 2018.

Benefits
With the high costs associated with the use of Light Crude Oil (LCO) for power generation and the unreliability of gas supply from the West African Gas Pipeline, the development and access to long-term cheaper gas feedstock in Ghana would offer immense economic gains to the country and augment Government’s efforts to increase Ghana’s generation capacity by attracting the necessary investment into the energy sector.
 Increased petroleum revenues to the State on the back of its stake in the OCTP license over the 18-year OCTP project life
 The creation of national employment opportunities from the new gas business opportunities.

 The achievement of a national vision to position the country as a regional hub for energy supply to the rest of Africa.

 GNPC’s strategic role as national gas aggregator will ensure competitively-priced gas to support domestic energy prices which is expected to facilitate the relocation of industries in Ghana.

 Access to long-term cheaper gas feedstock which can offer economic relief from the current power crisis facing the nation.

 Development of a robust power sub-sector with expected strong Independent Power Producers demand growth in the country.

 The development of a strong local content platform for petroleum sector development and participation.

 The development of the requisite institutional capacity to manage a gas system.

 Securing the long term future of Ghana’s energy sector that will catalyze the transformation of the economic fortunes of the country.

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